Australian Property

Viewing posts in the Australian Property category

An interesting debate on housing affordability

ScreenHunter_2119 Apr. 17 13.30 Please find below an interesting debate between economist, Matt Cowgill, and Godfrey Moase. Assistant Secretary of the National Union of Workers General Branch, on housing policy. The debate was in response to an article that Matt wrote in The Guardian late last year in which he challenged the notion that affordable housing can be achieved amid solid population growth, restrictions on development in pre-existing areas, as well as an urban growth boundary that restricts sprawl. Godfrey took issue with Matt's piece, expressing disappointment that he viewed neighbourhoods in “mercantile terms”....
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Eslake vs HIA on negative gearing

ScreenHunter_2113 Apr. 17 11.32 By Leith van Onselen In case you missed it, attached is an interesting debate aired last night on ABC's The Business  on the merits of negative gearing. In the one corner is Saul Eslake, chief economist at Bank of America Merrill Lynch, arguing (as I have done) that negative gearing is a wasteful policy that simply inflates house prices, without boosting housing supply and improving rental availability or affordability. In the other corner is the Housing Industry Association's (HIA) chief economist, Harley Dale, arguing that negative gearing is a non-issue. An interesting outcome from...
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RP Data weekly Australian house price update

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen In the week ended 17 April 2014, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, rose by 0.37%. It was the seventh consecutive weekly rise in values (see next chart). Values rose in four major capitals and fell in one (see next chart). Values are up 0.55% so far in April, again with values rising in four major capitals and falling in one (see next chart). Values are now up 4.12% so far in 2014, driven by big gains in Sydney and Melbourne, with Perth values falling: Over the past 12 months,...
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Melbourne’s ghost city sounds alarm bells

ScreenHunter_1605 Mar. 12 07.49 By Leith van Onselen Melbourne’s “build it and they will come” approach to construction, which has seen it rank high-up on the global skyscraper index, appears to be suffering more indigestion. Following recent reports that CBD and St Kilda Road vacancies have rocketed and rents plummeted, as apartment supply runs well above demand, The AFR is today reporting that apartment prices are falling as more off-the-plan stock hits an already oversupplied market: More than 2000 properties have been on the market for over two months around the CBD. About 14 per cent are selling for less than...
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Highrise Harry to sell-out to Chinese?

ScreenHunter_19 May. 16 15.12 By Leith van Onselen "Highrise Harry" Triguboff is reportedly considering selling Meriton Apartment's development business to a Chinese developer, in a deal that would net him close to $3 billion. From The AFR: Triguboff told AFR Weekend he re­ceived an offer for his business on a trip to China two weeks ago from the owner of a property developer that builds 200,000 dwellings there annually... “It is very early stages, but I could be prepared to sell the development part of the business and then the family could continue to collect the rent on the units I already own"... He [the...
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Melbourne’s rental market tightens

ScreenHunter_02 Apr. 09 08.45 By Leith van Onselen SQM Research has released rental vacancies data for March, which revealed a 0.1% monthly fall in the national vacancy rate to 2.0%. Year on year, vacancies are also down 0.1%, bucking the trend for the first time in several months where we have witnessed a loosening of vacancies when compared to the corresponding period of the previous year: According to SQM: Melbourne’s vacancy rate continues to tumble, now currently recorded at 2.1% - a figure it has not reached since September 2010. The capital city recorded both the largest monthly decline (0.3 percentage...
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Bassanese: Small city bubbles will save big

imgres David Bassanese has a questionable analysis of house prices this afternoon: As should be clear, house price cycles have differed across states. Relative to average weekly earnings per worker in each state, the peak in Sydney house prices came in 2003, followed by peaks in Hobart, Brisbane and Perth just before the financial crisis in late 2007. Melbourne and Darwin’s peaks did not come until 2010. All up, interest rate driven cycles have tended to be led by Sydney – to be then followed by other States. The resource boom has added an extra dynamic to price trends in Perth, Brisbane and...
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Kohler laments Australia’s expensive land

ScreenHunter_18 Jul. 05 10.22 By Leith van Onselen Alan Kohler has published a good post today at Business Spectator warning that increasing credit availability, brought about partly from the resurgence in securitisation, is combining with Australia's constipated land use/planning system to raise house prices, to the detriment of younger Australians: We are seeing two quite different markets being mixed together: one for credit that is active and plentiful (call this one nitro) and one for land that is short (call it glycerin)... There simply isn’t enough land being released in Australia to match either the demand for...
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Dwelling completions fell in Q4

ScreenHunter_01 Mar. 03 22.48 By Leith van Onselen The ABS has just released dwelling completions data for the December quarter, which registered a 2.0% seasonally-adjusted fall in the total number of dwellings completed over the quarter, with the 3.3% rise in detached house construction more than offset by a 9.9% slump in unit & apartment construction (see next chart). The decline in dwelling completions nationally was driven by a big 10.9% fall in Victoria, where unit & apartment construction slumped by 21.3% and house construction fell by a more moderate 1.3%. The fall in Victoria more than offset increases...
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Housing sentiment lifts on record foreign demand

ScreenHunter_05 Jul. 07 22.22 By Leith van Onselen NAB has released its Australian Residential Property Survey for the March quarter of 2014, which revealed a small rise in sentiment nationally amongst property professionals, with house price expectations also strengthening is all states except Victoria. Concerns about rising interest rates are starting to rise, whereas employment security continues to be viewed as the biggest impediment to buying property in most states. The Survey also found that foreign buyers were significantly more active in both the new and established property market, accounting for a record...
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Modelling housing rents

images I was motivated by this article in The Economist about housing costs in London to really dig down to how most economists think about housing supply and land markets.  Today I want to share a simple model I use to help understand compositional effects on measures of land and housing markets, and subsequently the reliability of particular measures for understanding potential supply issues. The model At time=0 a city has 20 people in 10 homes owned by out-of-town investors.  1 person from each home earns $52,000 per year, the other is a dependent.  Rent for each home is $250 per week and each...
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How to ensure housing fills the mining void

ScreenHunter_18 Jul. 05 10.22 By Leith van Onselen Following its dubious effort on first home buyers last week, the Housing Industry Association (HIA) has today released a decent research report assessing the role of housing as a leading indicator of the broader non-mining economy, as well as reforms that could be undertaken in order to help the economy transition away from mining-led growth and cope with the ageing population: New engineering construction (which captures and reflects the most visible element of mining investment) accounted for around half of aggregate GDP growth in 2011 and was the majority share in...
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Why builders should split from the HIA

ScreenHunter_01 Mar. 03 22.48 By Gavin R Putland, Research Officer at Prosper Australia Eight days after SBS reported that Treasury and the Parliamentary Budget Office are working on limiting negative gearing to new homes (while grandfathering past acquisitions), and two days after Louis Christopher of SQM Research backed the story, the Housing [sic] Industry Association has released a “research note” under the title First Home Buyers: The Big Picture. The front page says in part: Low FHB shares have also been attributed to changes in FHB grant regimes in many states, which have seen the grant for the purchase of...
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RP Data weekend housing market update

ScreenHunter_18-Mar.-18-17.582 Click to view RP Data’s latest weekly housing market update, which provides a useful snapshot of the housing market as at 23 March 2014. This week’s report includes: Latest weekly dwelling value results; Auction results & clearance rates; Latest median house & unit prices; Average time on market & vendor discounts; Mortgage market activity; and New listings...
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HIA pimps FHBs in new negative gearing defence

ScreenHunter_28 Jun. 12 16.40 By Leith van Onselen The Housing Industry Association (HIA) has today released a research report, entitled First Home Buyers: The Big Picture, which appears to be yet another thinly veiled attempt to thwart reforms to negative gearing: Concerns about First Home Buyer (FHB) participation in the home purchase market have surfaced repeatedly in the media over the past year... Commentary around the low FHB share has typically invoked the narrative that younger buyers are being ‘squeezed out’ of the market by investors with deeper pockets... Low FHB shares have also been attributed to...
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Sydney housing speculation goes bananas

ScreenHunter_24 Apr. 18 12.02 By Leith van Onselen RP Data's daily home values index shows the absurdity of the Sydney housing market, where values have almost gone exponential: Today's Lending Finance data, released by the ABS, provides a solid clue as to what is driving the Sydney housing market, as well as the blow-off in home prices nationally: property investors. As shown below, the value of investor loans in New South Wales (read Sydney) has skyrocketed, with Melbourne - the second hottest market - also experiencing strong growth: According to the ABS, investor finance commitments in New South Wales in...
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HIA repeats negative gearing lies

ScreenHunter_01 Jun. 28 09.52 By Leith van Onselen The AFR has published a detailed report today summarising the arguments for quarantining negative gearing. The article cites a number of commentators, including Saul Eslake and the Grattan Institute's John Daley, who essentially argue that winding back negative gearing would: Save the Budget money: around $4 billion per annum initially and $2 billion over the longer-term; and Improve housing affordability, by removing speculative demand from the housing market, increasing home ownership in the process. It's all fairly stock standard stuff, and nothing that hasn't...
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RP Data weekly Australian house price update

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen In the week ended 10 April 2014, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, rose by 0.19%. It was the sixth consecutive weekly rise in values (see next chart). Values rose in two major capitals and fell in three (see next chart). Values are up 0.17% so far in April, driven by big gains in Sydney and solid gains in Brisbane, which have outweighed falls in the other major capitals: Values are up 3.73% so far in 2014, driven by big gains in Sydney and Melbourne, with Perth values...
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Rental growth slows, yields deteriorate

ScreenHunter_07 Jul. 17 21.09 By Leith van Onselen RP Data has released its quarterly rental review, which revealed a sharp slowing of rental growth across Australia, with national house rents experiencing 0% growth over the March quarter, whereas unit rents grew by 1.3%. In the year to March, house rents rose by only 1.3% nationally, whereas unit rents rose by 2.6% (see below table). According to RP Data's Cameron Kusher: “With home value growth comparatively strong we are seeing a deterioration of rental yields in most capital cities. We expect that rental growth is like to continue at moderate levels over the...
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Did the property investor party just hit the wall?

ScreenHunter_07 May. 06 10.48 By Martin North, cross-posted from the Digital Finance Analytics Blog Yesterday, commenting on the latest ABS data, I hinted that the DFA household research, freshly minted for March 2014 contained indications that residential property investors were trending down, for the first time in more than 18 months. So today we examine some of the data from the survey. To start, this is a plot of residential property investors, by type (using our property segmentation models). After a significant rise since 2011, we see the hint of a reversal. If we then look in detail at the proportion of...
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New home finances retraces

ScreenHunter_01 Mar. 03 22.48 By Leith van Onselen Today’s housing finance data for February contained a sting in the tail for home builders, with mortgage demand for new housing retracing by 1.0% in February, giving back some of last month's big rise (see below charts). However, the news is much better when measured on a rolling annual basis, with the number of finance commitments for new homes and construction rising by 14.2% over the year (see next chart). Looking at at the state-by-state breakdown, which is presented below on a rolling annual basis since it is not seasonally adjusted, shows that the...
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Investor mortgages hit new record in February

ScreenHunter_31 Sep. 02 16.36 By Leith van Onselen The Australian Bureau of Statistics (ABS) has just released housing finance data for the month of February, which registered a 2.3% seasonally-adjusted jump in the number of owner-occupied finance commitments over the month: The number of owner-occupied housing finance commitments excluding refinancings registered a smaller 0.6% seasonally-adjusted increase over the month to be tracking 8% above the five-year moving average level. However, January's figures were revised up by 1.2%, which strengthened this month’s result. The number of owner occupied commitments...
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Interest rates are not the risk to house prices

imgres Callam Pickering at Business Spectator continues the drum beat about falling house prices today: What has been interesting about this boom is how localised it has been. Outside Sydney and Melbourne growth has mostly tracked incomes. Speculative activity is the distinguishing factor between Sydney and Melbourne compared with the other capital cities. The strong growth in Sydney and Melbourne simply cannot be explained by fundamentals such as income growth or construction costs. The likes of Brisbane and Adelaide have experienced little growth in speculative activity and consequently observed...
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Negative gearing is being “looked at”

ScreenHunter_12 Sep. 23 12.54 By Leith van Onselen SQM Research released its weekly newsletter last night, which provided more tentative confirmation that the Government is considering reforming Australia’s negative gearing rules: There was an SBS report in recent days suggested the Federal government is "looking at" this tax benefit. Macrobusiness were the first to republish it, and now so am I. According to the story “Government sources say one of the changes being considered by Treasury is the grandfathering of arrangements for existing investors, but limiting future access to negative gearing so only new...
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Chris Joye on why house prices are set for a fall

ScreenHunter_24 Jun. 20 19.46 By Christopher Joye, cross-posted with permission from The AFR: I welcome perma-bear Steve Keen’s commentary on my recent analysis of the asset-class, and his apparent comfort with my conclusions. It is, however, worthwhile clearing-up some misunderstandings as to how I arrived at them. It is doubtless frustrating for folks like Dr Keen, who claimed that Australian house prices would slump 40 per cent in nominal terms in 2008, to see that they are actually 22 per cent above their pre-global financial crisis peak today. Let me put that stark contrast another way. In March 2008 the...
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Keen on Joye’s bubble conversion

housing graph 3 From BS today, Steve Keen argues that previous housing bull and long term interlocutor, Chris Joye, has capitulated to his bearish view: ...though house prices have not done what I expected, one of the most prominent commentators asserting that there is a dangerous house price bubble in Australia is… Chris Joye. ...Joye’s mantra all through our debates some years back was that changes in house prices merely reflected changes in disposable incomes...This argument...hasn’t held up well. Using ABS house price data and the Reserve Bank data on disposable income, in the period from 2008 till 2010...
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Australian property through foreign eyes

ScreenHunter_1979 Apr. 08 08.01 By Catherine Cashmore, a market analyst, journalist, and policy thinker, with extensive industry experience in all aspects relating to property. Follow Catherine on Twitter or via her Blog. I had the good fortune to meet two investors from Dallas Texas last week - visiting in part, to survey the Australian real estate terrain and in return, provide a unique opportunity to glimpse the madness of it all through foreign eyes. A cursory look through the press paints a colourful picture for our visiting observers. Obviously, the spectacular rise in Sydney’s valuations has come under incredible...
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Credit Suisse: Macroprudential possible

imgres From Credit Suisse via the AFR, perhaps I've been too hasty about regulator capitulation on macroprudential tools: The most effective and potentially palatable form of non-monetary intervention in the overheating housing market would be to force lenders to incorporate larger interest rate buffers when assessing the ability of a borrower to service a loan, say analysts at Credit Suisse. ...While the RBA has dismissed the idea of imposing limits on LVRs – based on the fact that it would disproportionately affect first-home buyers, who it does not see as the portion of the market where the...
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Will the RBA succeed in jawboning property?

Nove Over the past few weeks I've noted the increasing confusion in RBA communications, aiming to be all things to all people or, as former Head of RBA Research Peter Jonson has put it, serving multiple masters. A part of this has been the back and forth jawboning of the dollar. Late last year it was working fine, taking some 5-10% off the currency. But this the policy was dumped and the losses immediately reversed (notwithstanding other factors at work). The basic lesson here is that jawboning doesn't work unless one is prepared to back words with action. That's a salient lesson as the RBA turns the...
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Auction clearances fall again

ScreenHunter_19 Mar. 13 13.12 By Leith van Onselen Auction clearance rates fell again over the weekend, driven down by falls in both Sydney and Melbourne. According to RP Data, the weighted average auction clearance rate dipped to 67.3% from 68.8% the week before, driven by a 2.5% fall in Melbourne (last weekend 65.9%) and a 4.1% decline in Sydney (last weekend 79.5%). Auction volumes were also down 11% on last weekend’s 3,009 reported auctions. The other data providers produced better results on much smaller samples, although they too reported falling clearances. The Real Estate Institute of Victoria...
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Realty spruiker boom

images It's a recurrent theme at MB that property advice is an unlicensed area of wild west speculation. Now, according to the AFR, the area is booming: Financial advisers are being offered “no course, no examination, 100 per cent success rate” real estate qualifications that could provide big commissions from investors wanting to plunge into booming property markets. ...“There should be all sorts of flashing red lights going on,” said Fausto Pastro, an accountant and financial adviser for William Buck, a financial consultancy. Many financial advisers, whose traditional commission income...
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RP Data weekend property market update

ScreenHunter_18-Mar.-18-17.582 Click to view RP Data’s latest weekly housing market update, which provides a useful snapshot of the housing market as at 23 March 2014. This week’s report includes: Latest weekly dwelling value results; Auction results & clearance rates; Latest median house & unit prices; Average time on market & vendor discounts; Mortgage market activity; and New listings...
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Dwelling construction about to break-out

ScreenHunter_1908 Apr. 02 16.14 The Business Day Markets Blog has posted analysis from RBS arguing that dwelling construction is about to pick-up sharply: We have been constructive on this sector and its increasing contribution to activity in the year ahead for some time. The most recent partials - lending, approvals - point to increasing momentum. While there are numerous supportive factors, an often under appreciated one is the continued above-trend pace of population growth. Recently released Q3 data confirmed population growth continuing at a decent 1.8% y/y pace driven by migration. This is among the highest in the...
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Stock on market rises in March

ScreenHunter_03 Jan. 30 13.18 By Leith van Onselen SQM Research has released its Stock on Market data for March, which revealed a 1.8% increase in listings over the month, but a 5.2% fall since the same time last year: According to the Media Release: ...year-on-year the nation’s stock is down by -5.2%, with Sydney still recording significant falls: -17.0% since March 2013. Contrastingly, Darwin’s stock levels have soared since this time last year, revealing a 12.8% yearly increase in sales listings. Managing Director of SQM Research, Louis Christopher says, “There are no new trends that have come out of the...
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RP Data weekly Australian house price update

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen In the week ended 3 April 2014, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, rose by 0.15%. It was the fifth consecutive weekly rise in values (see next chart). Values rose in three major capitals and fell in two (see next chart). Values are up 3.54% so far in 2014, driven by big gains in Melbourne and Sydney, with Perth values falling: Over the past 12 months, home values have risen by 10.88% at the 5-city level, again led by Sydney and Melbourne (see next chart). The next chart plots...
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